Visual effects group fights back against film subsidies

Daniel Lay, a former visual-effects film worker, is one of the most vocal opponents of subsidies to the film industry. Lay has created the group ADAPT, which organizes workers to fight against the subsidies. He is a former Sony employee. Lay was photographed in Culver City on April 29, 2014. (Photo by Brittany Murray/Torrance Daily Breeze)

The magic of visual effects added elegant-looking skyscrapers to Los Angeles for the futuristic film “Her,” blew up the city’s freeways in the blockbuster “Battle: Los Angeles” and let Autobots ravage Broadway in “Transformers.”

But now the visual effects industry is looking for help. Faced with job losses from runaway production, a Los Angeles-area group representing visual effects workers launched a new campaign last week to highlight its legal efforts to fight subsidies for the entertainment industry.

ADAPT, the Association of Digital Artists, Professionals, and Technicians, is one of the only Hollywood groups speaking out against incentives for the industry. Their new web site comes as state legislators seek passage of a bill providing $400 million in annual tax credits for the California’s film and television industry, a move criticized by ADAPT co-founder Daniel Lay.

“Help us take on the (Motion Picture Association of America) and bring an end to Hollywood Corporate Welfare,” ADAPT’s web site states.

Lay, a 34-year-old Culver City resident is a former visual effects worker who quit the industry last year to focus on legal efforts to stem runaway production.

He is petitioning the Department of Commerce and International Trade Commission, which oversees trade laws, to impose tariffs on U.S. studios that outsource their visual effects work to countries that offer subsidies. The tariffs, Lay believes, “would effectively level the playing field.”

Workers contend the visual effects industry has been hurt by financial incentives offered by countries like Canada and England. In June, Sony Pictures Imageworks in Culver City announced it was moving operations to Vancouver. Two other L.A. area companies, Rhythm & Hues, a studio that worked on the director Ang Lee’s “Life of Pi,” and Digital Domain, which did visual effects for the “Transformers” series and “Titanic” filed for bankruptcy in recent years.

Under the petition sought by Lay, if a studio shot a blockbuster film in the U.S., but used a Canadian-based company to do its visual effects, the studio would face a tariff. Tariffs are regularly paid by companies in other industries, such as computers and steel.

The goal, Lay said, is to ensure that foreign companies aren’t undercutting the U.S. With its new website, ADAPT seeks to raise money for the group’s legal effort and garner support from other industry workers.

Lay’s attorney David A. Yocis, a partner at Washington, D.C.-based Picard, Kentz & Rowe, said that tariffs have never been applied to digital products before.

The challenge for Lay’s petition is to convince the International Trade Commission that computer generated effects are a “tangible good” subject to a tariff, said Elon Pollack, a managing partner at Stein Shostak Shostak Pollack & O’Hara, at Los Angeles-based law firm specializing in custom and international trade law. “It’s a major obstacle to create a new tariff provision,” said Pollack, who isn’t involved in the case.

There are already signs of Lay’s influence in Sacramento, however. He met with Assemblyman Mike Gatto, D-Silver Lake, in June to talk about AB 1839, a bill co-sponsored by Gatto that’s expected to pass through the state Legislature by the end of August.

AB 1839, which is expected to be heard on the full Senate floor in the coming weeks, would grant up to $400 million annually in tax credits to film and television productions that shoot in California. State Sen. Kevin de Leon, D-Los Angeles, said in an interview Saturday that he supports the bill, but wants to change the program’s lottery system approach and instead give out tax breaks based on a production’s job-building capacity.

For his part, Gatto said he is seeking to add language to AB 1839 that asks the International Trade Commission to impose tariffs to combat unfair competition over the issue of visual effects.

The Assemblyman said he believes that tax credits are a “short term fix” but didn’t provide a timeline on when he thinks California should stop aiding the film industry. He also suggested the federal government should look at the subsidies.

“Congress needs to decide if they want to have these wars between the states and also (have) overseas companies stealing our businesses,” Gatto said.

While Lay’s petition applies only to visual effects and overseas subsidies, he also remains a critic of state subsidies. Politicians need to stand up and “discipline” the studios, Lay believes.

“We can’t keep writing a blank check to Hollywood,” Lay said.

Update: A previous version of the story in some instances incorrectly referred to visual effects as special effects.